As for Bitcoin itself, the main obstacles to its usefulness as a currency are its volatility and excessive rate of deflation. The volatility impedes its reliability, and the excessive deflation strongly encourages hoarding instead of spending.

That strikes me as something that you'd have backed up like hell. I'd even have it in hard copy in a vault somewhere.

Yeah, me too. They say that every man has his price. And for a billion dollars I would sell out any principles I ever had. But the thought that he might have died and his key died with him is an intriguing idea. I suppose it's even possible that at the very beginning, not anticipating the astronomical value it would reach, the founders intentionally created an account without a key, to hold some coins that nobody could ever access, for the purpose of stability.

As for Bitcoin itself, the main obstacles to its usefulness as a currency are its volatility and excessive rate of deflation. The volatility impedes its reliability, and the excessive deflation strongly encourages hoarding instead of spending.

Exactly! What the anti-government conspiracy types fail to understand is that a currency has to be manipulated and regulated to be useful and efficient in a modern industrial and global economy. It's why nobody is still on the gold standard. There's not enough of it to mediate a global economy, and the vagaries of market pricing lead to economic instability.

Crypto-currencies are really only useful for black-market transactions.

I'd sure love to stumble upon Satoshi's private key.

Logged

Daniel----------------"Anyone who has ever looked into the glazed eyes of a soldier dying on the battlefield will think long and hard before starting a war."-- Otto von Bismarck

Crypto-currencies are really only useful for black-market transactions.

Maybe at first glance to somebody living in a first world western country. Crypto seems pointless to you because the US dollar is backed by the full faith and credit of the US Government.

But if you live in Venezuela, India, many parts of Africa, and many other parts of the world - well your local currency being backed by the "full faith and credit" of your government may be an almost laughable idea. If I lived in Somalia I would much rather get paid in Bitcoin than Somali shillings. Already many countries in Africa use mobile phones to send and receive money, and private companies are feeding off the fees. Cryptocurrency is ripe for adoption in Africa because they are already using money digitally, cryptocurrency would cut out the middleman and save them money.

What about the potential of putting money-moving companies like Western Union out of business? They often prey on poor migrants who work in richer countries and send money to their families in poorer countries. They often charge higher fees to send money to poorer countries. Suddenly the poor have a new way to transmit money at a drastically cheaper rate, if not for free.

Or what about people that want to make truly anonymous transactions online for legal things. Maybe I'm in to particularly kinky porn that I don't want anyone to know about and I don't want showing up on bills. Currencies like Monero provide true anonymity online for good or ill. And there are many illegal reasons to use crypto other than black-market transaction, like money laundering. It may be wrong, ethically, but the demand is there and truly fungible, anonymous, cryptocurrencies can fill that demand with little recourse by any world governments.

Cryptocurrency, as an idea, has far greater potential than most people realize.

It doesn't matter why it's volatile. The reason why is irrelevant to the fact that excessive volatility makes a currency unreliable. If the USD had the volatility of BTC, it wouldn't be the standard of currency for most international transactions.

There's a good reason why BTC is not being widely used as a currency, despite having had numerous surges in popularity as an investment product. That's because the way it's engineered makes it ill-suited for a trade medium. I suspect that it was intended as an investment game right from the start.

Comparing it to the currencies of the world's shittiest economies is hardly a ringing endorsement.

As the market-cap of a cryptocurrency (or anything for that matter) rises it's volatility, on average, decreases.

Except that's not at all what we're seeing with Bitcoin. Because the mining difficulty algorithm is engineered to produce new units at a fixed geometric rate, its scarcity is not adjusted to offset changes in the market value. As we can see in the chart below, its market capitalization is very closely tied to its market value, and volatility actually tends to increase as they both go up. When the value increases, it spikes wildly as speculators sell off their holdings to capitalize on the higher value and then re-buy back in after the market drops.

Bitcoin's performance resembles that of a high-risk speculative bubble, not a smooth, stable currency.

The way it's engineered makes it ill-suited for a trade medium, which is why I suspect it was intended as an investment game right from the start. If you were trying to engineer a currency, why in the world would you build in increasing scarcity like that? Excessive deflation encourages hoarding, not spending. It's contrary to the very purpose of a currency.

Interesting that you mention Venezuela. Last week, that country's president Nicolas Maduro announced a plan to move the country onto its own national cryptocurrency, allegedly to be backed by the country's oil, gold, and mineral resources.

Most financial experts are doubtful that something like that will fix the country's economic problems though. I suppose it largely depends on how the currency is engineered to work, and how much people trust it. If it's anything like Bitcoin then it could become a flash-in-the-pan trading commodity but stagnate the Venezuelan economy.

What about the potential of putting money-moving companies like Western Union out of business? They often prey on poor migrants who work in richer countries and send money to their families in poorer countries. They often charge higher fees to send money to poorer countries. Suddenly the poor have a new way to transmit money at a drastically cheaper rate, if not for free.

Or what about people that want to make truly anonymous transactions online for legal things. Maybe I'm in to particularly kinky porn that I don't want anyone to know about and I don't want showing up on bills. Currencies like Monero provide true anonymity online for good or ill. And there are many illegal reasons to use crypto other than black-market transaction, like money laundering. It may be wrong, ethically, but the demand is there and truly fungible, anonymous, cryptocurrencies can fill that demand with little recourse by any world governments.

Cryptocurrency, as an idea, has far greater potential than most people realize.

Buying illegal and embarrassing stuff seems to be the niche it's fallen into, because why would you use something as clunky as Bitcoin when you can just use regular money like everybody else?

Crypto-currencies are really only useful for black-market transactions.

Maybe at first glance to somebody living in a first world western country. Crypto seems pointless to you because the US dollar is backed by the full faith and credit of the US Government.

But if you live in Venezuela, India, many parts of Africa, and many other parts of the world - well your local currency being backed by the "full faith and credit" of your government may be an almost laughable idea. If I lived in Somalia I would much rather get paid in Bitcoin than Somali shillings. Already many countries in Africa use mobile phones to send and receive money, and private companies are feeding off the fees. Cryptocurrency is ripe for adoption in Africa because they are already using money digitally, cryptocurrency would cut out the middleman and save them money.

What about the potential of putting money-moving companies like Western Union out of business? They often prey on poor migrants who work in richer countries and send money to their families in poorer countries. They often charge higher fees to send money to poorer countries. Suddenly the poor have a new way to transmit money at a drastically cheaper rate, if not for free.

Or what about people that want to make truly anonymous transactions online for legal things. Maybe I'm in to particularly kinky porn that I don't want anyone to know about and I don't want showing up on bills. Currencies like Monero provide true anonymity online for good or ill. And there are many illegal reasons to use crypto other than black-market transaction, like money laundering. It may be wrong, ethically, but the demand is there and truly fungible, anonymous, cryptocurrencies can fill that demand with little recourse by any world governments.

Cryptocurrency, as an idea, has far greater potential than most people realize.

Bitcoin is subject to having exchanges robbed blind for millions of coins, and the computational power keeps increasing, meaning that you will rely on an exchange to send and receive money easily. It's no different than another currency, just with the added bonus of Western Union shutting down overnight with all of your money in untraceable bearer bonds.

John: I understand your suspicions based on the currency’s design being ill-suited as a currency, but I think it’s more likely that this is the result of a lack of understanding of economics. Whoever Satoshi was, his expertise was in cryptography and computer science, not economics.

Logged

I would like to propose...that...it is undesirable to believe in a proposition when there is no ground whatever for supposing it true. — Bertrand Russell

I really like the basic concepts of bitcoin but in practice it has fallen far short of its goals. It's totally useless unless it is stable.

Logged

I disavow anyone in the movement involved in any illegal,unethical, sexist, or racist behavior. However, I don't have the energy or time to investigate each person and case, and a lack of individual disavowals for each incident should not be construed as condoning such behavior.

I really like the basic concepts of bitcoin but in practice it has fallen far short of its goals. It's totally useless unless it is stable.

A currency cannot be stable unless there is some person or agency regulating its supply. One of the problems with the gold standard was that there is no such person or agency. Block-chain and distributed accounting may have some real uses. But cryptocurrencies lacking any regulation beyond the supply limitation imposed by the mining algorithm will always by their very nature be unstable, and an economy requires a stable currency with a stable low rate of inflation to discourage hoarding and encourage saving through investment.

I really like the basic concepts of bitcoin but in practice it has fallen far short of its goals. It's totally useless unless it is stable.

A currency cannot be stable unless there is some person or agency regulating its supply. One of the problems with the gold standard was that there is no such person or agency. Block-chain and distributed accounting may have some real uses. But cryptocurrencies lacking any regulation beyond the supply limitation imposed by the mining algorithm will always by their very nature be unstable, and an economy requires a stable currency with a stable low rate of inflation to discourage hoarding and encourage saving through investment.

Doesn't bitcoin suffer from rampant deflation? Because its value only increases with increased demand and diminishing returns on supply?

John: I understand your suspicions based on the currency’s design being ill-suited as a currency, but I think it’s more likely that this is the result of a lack of understanding of economics. Whoever Satoshi was, his expertise was in cryptography and computer science, not economics.

I have no idea what "Satoshi" is or was. The fact that this thing was created under a cryptic pseudonym makes me all the more suspicious.

I'm no economics expert either, but even I understand that a properly functioning currency must maintain a stable value and a small rate of inflation. Bitcoin was clearly designed to start out computationally cheap and available for the initial investors, and then ramp up its scarcity over a long, slow arc to allow some time to grow its popularity before eventually skyrocketing in value.